What’s next for water, Energy & Rail? (NSPC Discussion 7/10/24
Using data and information from reliable sources such as the Office of National Statistics, the “Regulators” OFWAT & OFGEN, the Department for Transport (DFT), the House of Commons Library, The Competitions and Markets Authority (CMA) and other expert Academic studies we can form a broad perspective on how the Privatisation of UK Public Utilities has produced poorer and more costly services whilst providing excessive dividend returns for shareholders thereby inexorably transferring wealth from the many – into the hands of the few !
By 1979, at the outset of the “Thatcher” period of government, nationalised industries represented 10% of the UK economy and 14% of capital investment in the UK economy. In the first budget after her election victory in 1979, Margaret Thatcher reduced the top rate of Tax on the super-rich from 83% to 60% (before reducing it further to 40%) and needed to fill the financial hole in government revenue created by this. Though not discussed in the manifesto the first “Privatisation” plans came in 1980 with the disposal of shares in British Petroleum (BP), followed by the sale of British Aerospace in February 1981, Cable & Wireless in November 1981 and Amersham International in February 1982. It became the defining political policy of Conservative governments from that day to this !
November 1984 saw the biggest “Privatization” of them all with British Telecom (BT) (remember the Buzby campaign ?) sold for almost £4 billion with a further two sales in 1991 and 1993 raising some £10 billion. What most people didn’t know was that BT had just completed its modernization of its switch and transmission network with digital technology and had become a “license to print money” which it did for it’s new private “shareholders” with profits of £2 – £3 billion a year !
Whilst there were 1.5 million unemployed in Britain when Thatcher first came to power in 1979 by 1984 this had risen to nearly 3.3 million but for many who had the wealth to gorge themselves on these “privatization” share sales it had become “let the share dividends flow and the good times roll”. Those working in these privatized industries soon experienced the “culture change” with job and cost cutting and poorer terms & conditions of employment with the emphasis on delivering profit and relegating good customer service to a secondary consideration – and thus the scene was set for the future of Britain’s public services. Sir Bryan Carsberg, the first head of the telecoms industry “Regulator” OFTEL, noted “the omission of customer service in a regulatory regime that focussed on price meant that quality of service suffered, especially as consumers could not easily transfer to an alternative provider”.
By the time of the 1992 election, around two-thirds of public utility industries, employing some 900,000 people, had been sold and transferred to the private sector.
The UK economy had been transformed with wealthy shareholders owning and operating the UK’s public utilities to siphon off annual dividends to get rich out of the essential services underpinning daily life and our modern economy !
WATER
And so today we see OFWAT allowing water companies to make some 1,000 raw sewage discharges into our rivers and seas every day such that only 14 percent of English rivers are now considered to have good ecological status. With a UK population increasing by 6.8% from 2011 to 2022 water companies have been investing less in real terms (below the rate of price inflation) than when they were privatized in 1989 – and despite acquiring the companies debt-free upon “Privatisation” the owners have accumulated debt of more than £60 billion which has effectively been used to finance dividends to shareholders of over £72 billion a situation described by Professor Andrew Mullineux at the University of Birmingham as “Drowning In Debt” – and now they want to be allowed to increase prices by 40% to pay off those debts whilst continuing to pay rich dividends to shareholders ! In Scotland, water is in public ownership. Bills are lower and rivers and seas are cleaner. Publicly owned Scottish Water has spent £72 more per household per year (35% more) than the English water companies. If England had invested at this rate, an extra £28 billion would have gone into the infrastructure to tackle problems like leaks and sewage discharges. In 2022 research by Dr Kate Bayliss, a research associate with the department of economics at SOAS University of London revealed at least 72% of the UK water industry is controlled by firms in 17 countries, while UK firms own just 10%. In England Severn Trent Water is listed as being owned 13% by BlackRock: 7.45% by Lazard and 4.9% by Quatar Investment Authority and various other asset management groups; Wessex Water is 100% owned by a Malaysian company YTL; Northumbrian Water is owned by Hong Kong businessman Li Ka Shing; Thames Water is partly owned by investors from the United Arab Emirates, Kuwait, China and Australia and Southwest Water is 62% owned by a group of Australian institutional investors led by Macquarie, a coal and mining infrastructure investor.
RAIL
British Rail had been in state ownership since 1948 but since John Major’s privatization of November 1993 at least £31 billion has been shunted out of the network and into the hands of the private sector shareholders. For the travelling public, the cost of rail travel is now almost 8% higher in real terms than it was before privatisation. The McNulty report also found that by 2012 UK railways were, on average, 34% more expensive than European counterparts. ONS figures also show that by 2020 UK taxpayers were paying the private train operating companies £533 million a year to run services and in the year 2022/23 rolling stock companies (the owners of locomotives and carriages that lease them to the train operating companies) paid out £410m to shareholders as their profit margins rose by 41% ! This fragmented and layered structure of businesses now operating our railways, each extracting profits to fund shareholder dividends, inevitably adds significant costs to operating our rail services something described by Mick Lynch, RMT Union General Secretary, in November 2023 as a “rail system that has become a cash cow for the cloud of parasitic private interests that swarm around it”. And what a “cash cow” it is – with statistics from the Department for Transport (DFT) showing that from 1995 to 2020 rail passenger journeys in Britain increased from 563 million to 1,393 million – a 247% increase in 15 years !
And who are these parasitic beneficiaries ? Well Keolis co-owner of South Eastern Rail, Metro Link Trams in Manchester, Thameslink and the Docklands Light Railway in London is 70% owned by the national state railway company of France (SNCF) and 30% by a Canadian pension fund. Angel Trains which leases most of the UK rail operators rolling stock of some four and a half thousand vehicles is also 64% owned by the Canadian pension fund the “Public Sector Pension Investment Board”.MTR Corporation is a public transport company that owns and operates the London CROSSRAIL service known as the Queen Elizabeth Line and is 75% owned by the government of Hong Kong as well as other “Asset Management” shareholders.Avanti the west coast mainline service is 30% owned by Trenitalia the main rail operator in Italy and partly owned by the Italian state. First Group own the other 70%.First Group, listed on the London Stock Exchange as mostly owned by global and UK based asset management firms, also runs Great Western and the Lumo service from London to Edinburgh & Hull Trains. West Midlands Trains is 70% owned by Transport UK Group but also 15% by the East Japan Railway Company and 15% by Mitsui & Co, another Japanese corporation who also own 40% of Greater Anglia Trains. South Western Railway is owned by First Group (70%) and MTR Corporation (30%) which is owned by the government of Hong Kong, now, China.Arriva trains are owned by I Squared Capital, a company registered in the tax-haven Cayman Islands which also owns and runs Chiltern Railways, London Overground, CrossCountry, Grand Central railways.
ENERGY
In 1986, the gas sector was privatized, (Remember the “Tell Sid” campaign ?) ….and the electricity sector followed in 1990 when twelve regional electricity companies in England and Wales and National Grid were sold off to private firms. In the end, virtually all components of the British energy system had been placed under private ownership.
Most households now get their electricity and gas from the Big Five energy companies (British Gas, Ovo, E.ON, Scottish Power, EDF) now delivered through a Privatised “National Grid” and “UK Power Networks” making the UK the only country in Europe (apart from Portugal) which has a privatised electricity grid ! (National Grid generate the power and UK Power Networks distribute it through the network of cables, pylons and sub stations)
Today … the National Grid plc’s top ten shareholders range from global asset management firms BlackRock and Vanguard to public pension funds, notably those of Norway and the Abu Dhabi Investment Authority. “UK Power Networks” is 40%, owned by Cheung Kong Infrastructure Holdings (Hong Kong/China), 40% Power Assets Holdings (Hong Kong/China Company), and 20% the Li Ka Shing Foundation. So that today 98% of the UK energy grid is owned by investors around the World !
Figures from the House of Commons Library show that since privatisation in 1996, average domestic electricity bills had gone up by about one-third “in real terms”, while gas bills had gone up by just over a half by 2018. A Competition and Markets Authority’s report of 2016, suggested that a 1.25% margin would provide a “normal” level of profit for energy companies ….. but the “regulator” OFGEM reported profit margins between 2010 and 2017 had been 4% to 4.5% annually and estimated customers had been paying £1.4 billion a year more than they would in a fully competitive market. In contrast in France, publicly owned EDF kept energy bill rises to 4% in 2022 while our prices went up by 54% and are now going up further with a rise in the price cap.
Research has shown that prices are 20-30% lower in energy supply systems under public ownership and bringing the National Grid into public ownership would save us around £3.7 billion a year and buying it back would pay for itself in 7.5 years. The TUC has calculated it would only cost £2.85 billion to buy back the Big Five energy companies – a lot less than what the government spent propping up Bulb, a private company that collapsed in 2021.
As with water and rail, politicians seem to have sold our energy industry to foreign investors for them to make a good living, out of the “hard working British public”. EDF Energy UK is 100% owned by Électricité de France, a French public utility owned by the Government of France ! Scottish Power is 100% owned by Iberdrola, a Spanish energy electric utility, which counts BlackRock and the Qatari Investment Authority as its major shareholders. In early 2019 Npower was bought by E.ON UK, making both subsidiaries of the German parent company E.ON SE. Among the major shareholders of E.ON SE are RWE AG, another German energy company, Capital Group, a US asset manager, and the Canadian Pension Plan Investment Board, a Canadian Crown Corporation. Ovo Energy is privately owned and SSE is now part of Ovo and the two major shareholders of SSE are giant US asset managers: BlackRock and Invesco. And finally the major shareholders of Centrica, the lesser-known parent company of British Gas, include the UK asset management firms Schroders as well as the Bank of New York & Mellon Corporation, a US investment bank !
It must be a supreme irony to British pensioners that in paying for their public services they are helping to fund the pensions of Canadian pensioners and perhaps helps to explain why opinion polls have shown that support for public ownership of UK state and utility services has grown significantly in recent years. A YouGov poll of July 2024 showed 87% of people wanted the NHS “To be Nationalised and run in the public sector”: 85% wanted the same for Education: 82% for Water Services: 76% for Railways: 75% for Royal Mail: 71% for Energy: and 66% for buses !
This is a “substantial” increase in support for nationalisation from when the same question was asked prior to the two previous governments – during the 2017 general election. A clear, overwhelming and resounding desire for these public services to be owned and operated under public ownership and control and thereby accountable to the people who fund and pay for these services – without being ripped off by the parasites of global “Organised Money” a term used by American president Roosevelt in trying to lift his Nation out of the “depression” of the 1930s saying that “Government by organized money is just as dangerous as Government by organized mob”. A time then for brave politicians to grasp this public mood and re take control of our public services to ensure they operate in the “public interest” and not that of feeding the greed of “Organised Money”. We might equally reflect on the philosophical observations of Benjamin Franklin, one of the Founding Fathers of the United States, who cautioned: “Beware of little expenses. A small leak will sink a great ship.” In the case of our public services the profits going to private wealthy shareholders amply demonstrate this ! And so I hope this article also demonstrates the truth of another of his sayings that “An investment in knowledge pays the best interest” and we heed the wise words from George Lorimer. “Money can bring you financial security and instant recreation but remember to pause and enjoy the priceless moments that money is not a part of”.
Jan Zablocki
Organising Secretary
Retired Members Section
North Staffs (Postal) Branch
Communication Workers Union (CWU)
Ralph Waldo Emerson, a prominent American essayist, philosopher, and poet, once penned a profound observation:
“Money often costs too much.”
Money Quotes: George Lorimer
32nd President of the United States: 1933 ‐ 1945
Address at Madison Square Garden, New York City
. We know now that